Chapter 5.1, Problem 36E

In exercise $35-36$, use the following information. When “trading up,” it is preferable to sell your old house before buying your new house because that allows you to use the proceeds from selling your old house to buy your new house. When circumstances do not allow this, the homeowner can take out a bridge loan.

Tina and Mike have sold their house, but they will not get proceeds from the sale for an estimated $3\text{months}$. The owner of the house they want to buy will not hold the house that long. Tina and Mike have two choices: let their dream house go or take out a bridge loan. The bridge loan would be for $\$85,000$, at $8.5\%$ simple interest, due in $120\text{days}$.

a. How big of a check would they have to write in $120\text{days}$?

b. How much interest would they pay for this loan?